Europe union clouds outlook, Mideast strife could clip supply
SAN FRANCISCO (MarketWatch) — Crude-oil futures are seen modestly higher in 2012, with the European sovereign-debt crisis and the reverberations of the Arab Spring the twin concerns most likely to outlive 2011 and keep oil traders holding their breaths well into the new year.
News from either camp will dictate prices, as they play into expectations of diminished demand, in the case of a global economic slowdown due to an euro collapse, or tighter supplies if major oil exporters experience more social unrest in 2012.
The year’s most likely candidate to be the wild card? Iran, as potential for tighter sanctions loom and the world’s third-largest oil exporter toys with creating havoc in the Strait of Hormuz, crossroads of the oil world. Read commentary on Iran’s war games.
Despite the pitfalls and a likely bumpy first half of the year, most analysts see oil as modestly higher overall.
The key to expectations of higher prices is the United States economy, said James Cordier, a fund manager with Optionsellers.com in Florida.
“The U.S. economy appears to be doing better,” he said. “The U.S. is still the largest consumer of energy in the world. That will be a very strong, supportive piece of the puzzle for energy” into the next year.
While demand appears to be slowing in key emerging markets such as China, and euro-zone woes will keep plaguing markets, these were expected outcomes that won’t catch markets by surprise, Cordier said.
He forecast prices would peak around $120 a barrel in June or July, the height of the driving season in the U.S. They could dip as low as $85 in 2012, he added.
The risk is on the upside, he said. “We’d buy oil at $90 a barrel with both hands,” Cordier said.
Arab Spring
Oil CL2G -0.07% , which gained 9% for the year as of Dec. 23, when it traded just under $100, spent most of 2011 at the mercy of external factors.
Most keenly, prices felt the ripple effect of the Arab Spring, a series of revolutions, demonstrations, and social unrest that shook the Arab mostly in the first half of 2011.
The sorest point was Saudi Arabia, the world’s largest oil exporter and the second-largest oil exporter to the U.S. after Canada. Protests there, however, were watered down by ratcheted-up government spending, and the effort to appease the demonstrators appears to have succeeded.
